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Innovation Investment Tracker | December 4 – 9

Banking Focus

Talk about topping the charts. 2014 was a very active year for the banking sector that drove a little more than $25B in deal activity so far this year.

Of the total $25.2B investment in the banking sector, 48 percent was driven by strategic or venture –backed investments. Additionally 19 percent was driven by an auction won by Blackstone for Catalunya Bank and 21 percent was driven by eight IPOs and one SPO among which include Citizens Financial Group Inc ($3B), Santander Consumer USA ($1.8 B), Great Western Bank ($288M) and Fifth Third Bank ($179M). Eight companies received more than $ 1B and 76 percent of the total funding.

The most active VCs/PEs were Victory Park Capital and Tiger Global Management involved in 4 deals each followed by Blackstone and TPG with participation in 3 deals. From a geographic perspective US was the most active region with almost two-thirds of the investments followed by Europe with an additional third and Asia (ex-China) which received $479M.

To be fair, some of the larger deals are the remnants of the financial crisis and subsequent bailouts. For example the IPO for TSB was one of the conditions of the Lloyd’s bailout in 2008. And, the biggest deal YTD of the banking sector was an auction for CatalunyaCaixa’s mortgages of which was done by the Fund for the Orderly Banking Restructuring, the Spanish government rescue fund.
But not all of the activity is of that ilk even though their rise may be related to a gap that the financial crisis created for some business segments. Last week, AvantCredit, an online consumer player, secured a $300M debt funding round by Victory Park Capital. The investee also received $225 M in a fourth-round of investment by several private players and YTD it grabbed $1B.
Chicago-based AvantCredit fills a hole in the lending industry by providing loans to mid-prime borrowers. AvantCredit currently serves 100k such businesses and now runs a portfolio of $310M. Like other alternative lenders, AvantCredit uses its own proprietary algorithms to reduce its risk, and charges a comparably higher interest rate. Its debt and equity funding rounds were done in order to allow the business to scale and grow.

Another deal worth mentioning this week was the $52.3M fifth-round founding for Equitas Holdings, a loan provider in India, which included $18.2M from Creation Investments Capital Management and $16M by Deutsche Investitions.

Equitas Holdings operates three different companies: Equitas Microfinance which offers small loans to unbanked customers, Equitas Finance which gives medium loans to SMBs and Equitas Housing Finance which lends to borrowers to build housing facilities. Microfinance is seen as an efficient tool to foster development in emerging countries.

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